FTSE 100 preview: US woe knocks shares

By Reuters
Updated: 03:01 EDT, 2 June 2011

The FTSE 100 is expected to fall again with investors gloomy after a series of disappointing US data raised concerns about the strength of the global economy, especially ahead of Friday's key US non-farm payrolls report.

Market watcher: Technical analysis of the FTSE 100 index was cautious

Financial bookmakers expect the FTSE 100 index to shed up to 60 points, or 1.0% after closing 1.0% lower on Wednesday at 5,928.61.

UK blue chips reversed a big chunk of a late-May rally in the first session of June after a below-forecast US ADP private employment report and weak ISM survey added to concerns about the domestic economy, with UK Markit/CIPS manufacturing and housing data weak.

Wall Street suffered its worst session since August on Wednesday as investors baulked at more signs the economic recovery is fading, with the Dow Jones industrial average down 2.2%, the S&P's 500 Index down 2.3% and the Nasdaq Composite Index down 2.3%.

Japanese shares also dropped sharply on Thursday, hit by the poor US macro data as well as growing political uncertainty as Japanese Prime Minister Naoto Kan faces a no-confidence motion later in the day.

And the euro zone's debt crisis was also at the forefront of investors' minds after ECB Executive Board member Juergen Stark was quoted as saying on Wednesday a rollover of Greek bonds that does not constitute a default may be a way of involving the private sector in tackling the country's debt problems.

Technical analysis of the FTSE 100 index was cautious. 'Based on the March bottom at 5,591.59 and the May top at 6,103.73, expectations are for this index to continue to work its way lower into a key retracement zone at 5,847.66 to 5,787.23,' said Enis Mehmet, analyst at Autochartist.

'A move to the low level of this zone will take out the recent bottom at 5,810.46. This action will further support the idea that a major down move is beginning as indicated by the series of lower-tops and lower-bottoms,' Mehmet added.

On the macroeconomic front on Thursday, May's Markit/CIPS construction index will be released.

Across the Atlantic, the latest weekly US jobless numbers will give another pointer for the May US jobs report, with April US factory orders and revised durable goods orders due.

Two MPs have called on RBS to explain the bank's accounting methods which they claim may be distorting its capital position by as much as £25bn, The Daily Telegraph said.

TMX Group, Canada's leading stock exchange operator, held talks with a third party for nearly a year before they were derailed by regulatory and valuation concerns, and before more fruitful talks ramped up with LSE.

The LSE and its takeover target TMX Group won the approval of British and Canadian authorities to take their planned $3bn combination to shareholders later this month.

The Office of Fair Trading has launched a probe into the proposed acquisition of Pinewood Film studios by real estate investment company Peel Holdings and may refer the case to the Competition Commission, The Financial Times said.

Car dealer Lookers is rumoured to be the target of a £365m or 95p per share bid, the Daily Mail Market report said, with investors Jack Petchey, Sir Philip Green's stepson Brett Palos and a real estate private equity firm on the verge of tabling an offer before next Wednesday's 'put up or shut up' deadline.

There will be results today from Johnson Matthey, Asos and McKay Securities, with updates from WPP and Kingfisher.